On the heels of its latest rebrand, HiFi (formerly Mainframe), today launched its fixed-rate cryptocurrency lending protocol, which enables anyone to create fungible debt obligations on the ethereum blockchain. Fixed-rate lending options give investors the opportunity to better map out finances and trading strategies. Additionally, the HiFi protocol lowers collateral requirements for cryptocurrency lending and lifts the barriers preventing highly volatile assets as potential collateral pairs for crypto lending and borrowing applications. At the outset, HiFi offers USDC stablecoin borrowing with WBTC (wrapped Bitcoin) collateral, and the HiFi team plans to rapidly add products and services to expand lending markets and collateral pairs.
“Fixed-rate lending is an important milestone for DeFi,” said Doug Leonard, CEO of HiFi. “Investors and traders need less-volatile options so that they can plan finances, have predictability in expenses and hedge investments with certainty. With the surge in DeFi lending activity, protocols like Aave have attempted to offer stable rate lending. However, market volatility has diminished the value of these “stable” rates as borrowers incur fees to maintain a semi-fixed position.”
Amid the dramatic volatility of cryptocurrency markets, developers have struggled to maintain a balance between collateral demands and incentives for borrowers and lenders. Still, the decentralized finance (DeFi) markets have ballooned to a more than $40 billion evaluation. HiFi’s protocol automates incentives in a perpetual balancing act that optimizes value for all parties in the lending process.
HiFi works by automatically adjusting incentives between borrowers, lenders, and guarantors, each representing a distinct and complementary position of economic exposure. Borrowers deposit collateral and mint tokens, representing a debt obligation. Lenders purchase the tokenized debt obligation, typically at a discount, and redeem them for face value at maturity. In the future, the protocol will allow guarantors to purchase collateral at a discount when collateral-accounts fail to satisfy the collateral requirement.
“HiFi opens up decentralized lending to a whole new world of diversified debt markets,” said Leonard. “Fixed-rate lending, especially for volatile assets, allows traders to take more aggressive positions and rewards all parties in the process with greater ROI.”
The HiFi Lending Protocol allows anyone to create fungible on-chain debt obligations economically similar to zero-coupon bonds. The tokenized debt obligations are backed by a surplus of collateral that is escrowed into audited and publicly viewable Ethereum smart contracts. A novel system of incentives, including penalties, discounts, and arbitrage opportunity, protects the protocol from under-collateralization. Future compatibility with other DeFi primitives will enable participants to earn income from multiple DeFi protocols at once. HiFi tokens align the incentives of each stakeholder, balances the participation of ecosystem members, and provides certain desirable benefits within the system.
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